| Leveraging data, technology and AI for a sustainable future |
| Technology is playing a critical role in scaling up climate action and transforming capital markets. It is helping to overcome challenges in data gaps and risk modelling and ensure market and investor confidence in sustainable products and projects. Nevertheless, more investment is needed to support technological advancement, and with new technologies comes uncertainty. This edition of the Sustainable Policy Institute Journal examines the key role data and technology will play in driving green finance and the economy-wide transition. It explores the latest policies for innovation and technological advancement, and the increasingly prevalent role of artificial intelligence and machine learning for investors and asset managers |
To better understand, and thereby mitigate, potential financial risk, more disclosure and reporting of financial activities is integral. This importance has been reflected in the proliferation of regulation and taxonomy frameworks introduced in recent years. Contributors from the Bank for International Settlements and MSCI Sustainability Institute discuss the need to manage and mitigate the financial risks associated with sustainable finance and look at how to make transition projects investable.
Collecting reliable and actionable data remains a big challenge. Contributions from Citi, BNP Paribas, the International Sustainability Standards Board and the Open Data Institute delve into the hurdles currently faced by investors and asset managers. Some of the solutions they call for include collecting data on a much timelier basis, treating data like a public infrastructure and combining both thematic screening and quantitative analysis tools.
New technology, and in particular artificial intelligence and machine learning, hold great promise for making data collection and risk identification easier and more efficient. Contributors from Banca de España, the Hong Kong Monetary Authority, International Finance Corporation and University of Oxford’s Future Impact Group examine the areas of green finance where technology might spur on developments. However, the environmental impact and safety risks of such technology need to be considered, especially in developing countries.
While advancements in AI and other innovative technologies can cause uncertainty, the financial sector must capitalise on and integrate these tools to support better investment practices, data and information as well as risk management. Technology developments provide huge opportunities for scaling up a sustainable economy.
